Severance Agreements: What to Check Before Signing

When an employer ends a job, it may offer a severance agreement. The offer usually includes money, benefits, or both, in exchange for certain promises from the worker. The document can look routine, but it often contains legal terms that affect your rights for years. Before you sign, it helps to understand what the agreement says, what you are giving up, and how much time you have to decide.

This guide explains the common parts of a severance agreement in general terms. It does not decide whether a specific offer is fair, and it does not replace advice about your own situation.

What a severance agreement usually includes

Most severance agreements offer payment or benefits in return for a release of claims. A release means that you agree not to sue the employer over the claims covered by the document. The scope of the release matters a great deal. Some releases cover only employment claims, while others are broader.

Many agreements also include confidentiality terms, which restrict what you can say about the agreement or the company. Some include non-disparagement clauses, which limit negative statements about the employer. Others include return-of-property requirements, cooperation clauses, or restrictions on working for competitors. Read each section and ask what it means in practice.

Deadlines and the review period

Severance offers often come with a deadline. Some agreements require a signature within a set period, and some allow the worker to revoke a signed agreement within a short window. Federal rules for workers age 40 and older include specific requirements for releases of age discrimination claims, including review and revocation periods. The details must be followed closely, because an agreement that does not meet the requirements may not be enforceable as written.

Mark every deadline on your calendar as soon as you receive the offer. Do not sign under pressure, and ask the employer to confirm the deadline in writing if it is unclear. A request for more time is common, and it is reasonable to ask.

Claims you may be giving up

Read the list of claims in the release carefully. Common examples include discrimination, harassment, retaliation, wage claims, and claims under state law. Some releases also cover claims you do not yet know about. A lawyer can help you understand which claims are covered and which may not be waivable under the law that applies.

Some protections cannot be waived by agreement. Certain rights involving government agencies may be preserved even when the release is signed. Ask a lawyer whether the agreement affects your ability to file a complaint with an agency, because the answer depends on the wording and the law.

Confidentiality and non-disparagement

Confidentiality clauses can limit discussions about the separation, the company's practices, or the settlement amount. Non-disparagement clauses can restrict what you say about the employer. These terms can affect future job searches, references, and conversations with coworkers. Some states have rules that limit these clauses in specific situations, so check the law where you work.

Ask the employer whether the confidentiality terms are mutual, meaning whether the company is also bound. Ask what happens if you need to discuss the situation with a government agency or your own lawyer. Those questions can reveal important limits in the agreement.

Money, benefits, and taxes

Look at how and when severance will be paid. Some agreements provide a lump sum, while others pay in installments. Check whether health insurance continuation is included, how it is paid, and how long it lasts. Ask whether the amount is gross or net, and whether any deductions apply.

Severance can affect taxes, and it may also affect unemployment benefits in some states. Ask a tax professional or a lawyer how the payment is treated. Do not assume that the amount on the offer is the amount you will receive after taxes and deductions.

When to ask a lawyer to review

Consider a lawyer's review if the agreement includes a broad release, restrictive covenants, or confidentiality terms that worry you. A review is also helpful if you believe you have a claim against the employer, such as unpaid wages, discrimination, or retaliation. A lawyer can compare the offer to the claims you may have and explain what you would be giving up.

When you hire a lawyer for a review, ask how fees are set. Some lawyers charge an hourly rate, while others use a flat fee for a document review. Get the terms in writing. Check the lawyer's license with the state bar before you sign an agreement.

Questions to ask before you sign

• What claims does the release cover, and are there exceptions?
• What is the deadline to sign, and is there a revocation period?
• Are the confidentiality and non-disparagement terms mutual?
• Can I speak with a government agency or my own lawyer without breaking the agreement?
• How will the payment and health coverage be handled, and when?
• Will the severance affect my unemployment benefits in this state?
• Can any unclear terms be changed in writing?

The employment practice area covers separation and workplace disputes. The business area may help if the agreement involves ownership, contracts, or a business relationship. The USAGov website offers general information about jobs and labor laws.

Free and low-cost help

Legal aid organizations may help workers with limited income. The USAGov website lists resources for finding legal help. Some law school clinics also review employment documents, and some unions or worker advocacy groups provide guidance.

Take your time, ask questions in writing, and keep copies of every version of the agreement. A calm review now can prevent confusion later.

Frequently asked questions

Do I have to sign a severance agreement?

No. Signing is your choice. Ask what happens if you do not sign, because the offer may expire, and some benefits may be tied to the agreement.

Can I negotiate the terms?

Often, yes. Employers sometimes change the amount, the timing, or the wording of certain clauses. Ask in writing and keep the response.

What if I already signed and changed my mind?

Check the revocation period in the document and any federal or state rules that apply. The window may be short, so act quickly and ask a lawyer right away.

Related: Browse guides on legal topics and employment law.

General information, not legal advice. Laws change and every case is different — talk to a licensed attorney about your situation.